Dealing with corruption
USE EXTREME CAUTION WHEN ENTERING INTO INTERNATIONAL, HIGH-RISK TRANSACTIONS
MARK JENKINS, GLASSRATNER ADVISORY & CAPITAL GROUP LLC, DALLAS
I TYPICALLY GET a bit excited about movie sequels despite their
historically bad reputations. I have enjoyed a few: “The Empire
Strikes Back,” “Aliens,” Star Trek II – Wrath of Khan,” “Godfather
II” and the highly anticipated sequel to Ridley Scott’s “Blade Runner.” What about corruption scandals? Do they have sequels? Of
course they do!
In the last four years, Brazilian federal prosecutors have had
their courtroom dockets full of bribery and kickback cases related
to Petrobras, the Brazilian state-controlled oil company. The
Brazilian federal police nicknamed the Petrobas investigation,
“Operation Lava Jato” or “Operation Car Wash”.
Now we have a second scandal - Eletrobras, the Brazilian
state-controlled power company, which produces electricity
through electric, hydro and nuclear power plants. It has been
quietly involved in the follow up investigations with code names
such as “operation radioactivity” and “operation electroshock”. It
has promises of similar notoriety to Petrobras; but has not received
as much media attention.
Similar to Petrobras, Eletrobras involves federal prosecutors
arresting high-level executives, construction companies involved
in scandal, and a civil class action lawsuit for securities
However, I am getting ahead of myself. To best understand the
Eletrobras scandal, it’s important to get a grasp on the Petrobras
scandal. They are interrelated and overlap.
The name “Operation Car Wash” originated from a gas station
two miles west of Brasilia’s government buildings called Posto da
Torre or Tower Gas Station. The Wall Street Journal reported in
June of 2015 that a money transfer services allegedly used to
transfer bribe payments from Petrobras to Petrobras executives’
offshore accounts was on the premises of the gas station.
THE ORIGINAL SCHEME
According to the US Department of Justice (DOJ), the Petrobras
scheme of bribes and kickbacks came in part through a system
put in place by Odebrecht and its subsidiary, Braskem, a Brazilian